How Artificial Intelligence & Machine Learning will change Accounting
Accounting finally embraces the future, having lagged behind the technological curve.We’re currently living through “the fourth industrial revolution”. The tech startup boom has given way to widespread disruption across almost every industry, and the breakneck pace of change is truly unprecedented. Even industries like banking, which have traditionally moved at a glacial speed, are finally realizing that in order to stay relevant to modern consumers, they need to up their technological innovation and investment. FinTech is now rapidly changing the financial landscape, and PropTech is doing the same for the real estate industry. But what about accounting?
The stalwart accounting industry has always traded on its reliability rather than its flexibility, and as a result has held out longer than perhaps any other industry when it comes to the forward march of advanced machine learning technology. But, tech-savvy customers and businesses now expect speed, efficiency, and ease. Furthermore, new reporting standards which will come into effect in January 2019 may force accountancy out of its inertia. The new standards, IFRS 16 / US-GAAP ASC 842, will move all leases onto the balance sheet. This requires the organization of all physical and digital leases and key data to be extracted – a task that is really tedious without the assistance of technology.
Advances in Accounting
Once in effect, the new standards will make accounting more transparent, and it has often been this drive towards transparency that has propelled other industries to embrace new advances. Across the board, artificial intelligence (“AI”) and machine learning (“ML”) have been at the core of disruption and investors are pouring more and more capital into researching these technologies than almost any other. Only since 2011 venture capital firms have invested over $6.6 billion in AI technology, an Evercore report shows. However, it would be false to claim that accounting is completely behind the times. In fact, some changes are already under way.
In 2016, accountants embraced the cloud. According to Capterra, only two out of five accounting software users were in the cloud in 2015. This was projected to change dramatically in 2016, spurred on in no small way by the fact that many bookkeeping technologies have discontinued their desktop services.
The impact of AI and ML
Where AI and ML will have real, tangible impact on accounting, is by cutting down drastically on the number of repetitive tasks, such as data aggregation, which will leave accountants free for more strategic projects and analytical tasks. The IFRS 16 / US-GAAP ASC 842 transition will require monumental amounts of time for lease review and data aggregation. Given the hard deadline by January 2019, it is crucial to let your accountants focus on the core client value additive tasks – analysis and interpretation. The time-consuming work of gathering the data can be left to an AI and ML based software. Why not let the latest advancements in technology help you collect data from leases for you? AI and ML will be at the core of future innovations and changes in accounting. Software won’t just collect, store, and display information, but will learn from the data, enabling accountants to automate many processes and decisions, while increasing transparency and legibility. Through this process, security and accountability will also be strengthened, and the threat of human error will be all but eliminated.
One big fear for many accountants is that the advent of AI and ML will mean their skills are no longer needed. However, as mentioned previously, while it’s true that many menial, repetitive tasks such as banking reconciliations or initial analyses will be automated, it actually implies accounting will become an even more interesting profession. With data-entry chiefly left up to machines, there will be an increased focus on “judgement” tasks, which allows accountants to take up more tactical, or client-focused roles. Entry level accountants that spent their nights manually data entering will now develop a more well-rounded skillset. There will also probably be a heightened need for data analysts and tech-focused employees within accounting departments, so accountancy undergrads should probably expect to see more modules that focus on IT, or accounting software.
AI and machine learning innovations will increase the quality of audits, drive up efficiency, and offer more opportunity for greater insight. As we live in an age where more and more data is being produced, all indicators point to the fact that this will actually drive up the accounting caseload. The future of accounting is bright, but firms that prefer the archaic practices will need to vastly change their approach. For some, it’s a case of innovate, or risk becoming obsolete.